Ashok Singh Vs ACIT (ITAT Jaipur)
The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has deleted a ₹10 lakh addition under Section 69A, holding that an addition could not be made under Section 153A in an unabated assessment without incriminating material found during the search.
In Ashok Singh vs. ACIT, the Tribunal found that the addition rested on Annual Information Return (AIR) and CIB transaction information, together with rejection of the assessee’s explanation. The assessment order did not identify any incriminating material found or seized during the search relating to the disputed addition.
Following the Supreme Court’s decision in PCIT v. Abhisar Buildwell (P.) Ltd., the Tribunal allowed the assessee’s appeal. The consequential application of Section 115BBE also did not survive.
Background: Search Followed by Section 153A Proceedings
The assessee filed his original return under Section 139(1) on 27 August 2015, declaring total income of ₹3,64,820.
A search and seizure action under Section 132 was subsequently conducted on 2 August 2017 in the case of members of the Kiran Fine Jewellers Group, of which the assessee was a member.
Following the search, a notice under Section 153A was issued on 11 January 2019. The assessee filed his return in response on 12 February 2019, declaring the same income as in the original return.
During assessment proceedings, the Assessing Officer noticed cash deposits aggregating to ₹36,75,715 in the assessee’s account with Malviya Urban Cooperative Bank, based on AIR and CIB information.
Assessee Explained Deposits as Redeposit of Earlier Withdrawals
The assessee submitted that he was engaged in purchasing and selling plots.
He explained that the deposits were sourced partly from cash withdrawals of ₹10 lakh on 6 December 2013 and ₹20 lakh on 31 December 2014, made for proposed purchases of plots.
According to him, the proposed transactions did not materialise, and the withdrawn cash was subsequently redeposited. He also referred to ₹2 lakh received in cash from the sale of a plot.
The Assessing Officer rejected the explanation, observing that particulars and documentary evidence of the proposed property transactions had not been furnished.
He also questioned the interval between withdrawal and redeposit, noting gaps of approximately fourteen months for the ₹10 lakh withdrawal and three months for the ₹20 lakh withdrawal.
AO Treated ₹10 Lakh as Unexplained Money
The Assessing Officer held that the source of deposits remained unexplained to the extent of ₹10 lakh.
He added this amount under Section 69A and applied Section 115BBE. The assessment was completed under Section 143(3) read with Section 153A on 18 December 2019.
The CIT(A) rejected the assessee’s challenge both to the validity of the addition without incriminating search material and to its merits.
Before the Tribunal, the assessee again raised the legal objection and alternatively contested the addition and consequential taxation.
Assessment Had Attained Finality Before Search
The Tribunal examined whether the assessment was pending on the search date.
It noted that the original return had been filed on 27 August 2015 and that, according to the material before it, no Section 143(2) notice had been issued within the prescribed period.
The assessment had therefore attained finality and constituted an unabated assessment on the date of search.
This finding was central because the scope for additions in an unabated assessment under Section 153A depends upon the existence of incriminating search material.
Supreme Court Ruling Applied
The Tribunal relied on PCIT v. Abhisar Buildwell (P.) Ltd., [2023] 454 ITR 212 (SC).
It explained that, for completed or unabated assessments, no addition can be made under Section 153A in the absence of incriminating material found during the search.
Examining the assessment order, the Bench found that the disputed addition arose from AIR/CIB information and the Assessing Officer’s rejection of the explanation.
The order identified no incriminating material discovered during the search having a bearing on the ₹10 lakh addition. Consequently, the jurisdictional condition recognised in Abhisar Buildwell was not satisfied.
Addition Deleted; Section 115BBE Consequence Also Falls
The Tribunal set aside the CIT(A)’s order on this issue and directed deletion of the ₹10 lakh addition under Section 69A.
Since Section 115BBE had been applied consequentially to that addition, its application also ceased to survive.
The Tribunal did not adjudicate the assessee’s explanation on merits, treating those grounds as academic. Relief thus followed from the absence of incriminating search material in an unabated assessment, rather than acceptance of the claimed source of deposits.
Cases Discussed
- PCIT Vs Abhisar Buildwell (P.) Ltd. — [2023] 454 ITR 212 (SC), Supreme Court, 24.04.2023. Held that no addition can be made in completed/unabated assessments under Section 153A without incriminating search material.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This appeal by the assessee is directed against order dated 26.09.2022, passed by the Ld. Commissioner Of Income Tax, Appeal, Jaipur-4 [in short as “Ld. CIT(A)”] for assessment year 2015-16 raising grounds of appeal:-
1. In the facts and in the circumstances of the case and in law, the ld. Assessing Officer “AO has grossly erred in passing the assessment order under section 143(3) read with section 153A of the Income-tax Act, 1961 (“the Act”), without any incriminating document or material relating to the assessment year under appeal being found or seized during the search. Consequently, the impugned assessment is without jurisdiction, arbitrary, unjustified, and illegal. Relief may please be granted by quashing the entire assessment order, being illegal and void-ab-initio.
2. Without prejudice to Ground No. 1, in the facts and in the circumstances of the case, the ld. AO has grossly erred in law and on facts by arbitrarily making an addition of Rs. 10,00,000 under section 69A of the Act by treating cash deposits in the bank account as unexplained money, despite valid explanations and documentary evidence provided by the assessee. The addition of ld. AO confirmed by the ld. CIT(A) is arbitrary, unjustified, illegal, and contrary to the facts and evidence on record. Relief may please be granted by deleting the addition.
3. In the facts and in the circumstances of the case and in law, the Id. AO has grossly erred by invoking the provisions of section 115BBE of the Act without appreciating the genuine nature of the deposits and the valid explanations supported by documentary evidence submitted by the assessee. The action of ld. AO confirmed by the Id. CIT(A) is unjustified, misplaced, illegal, and bad in law. Relief may please be granted by quashing the invocation of section 115BBE of the Act.
2. Briefly stated facts of the case are that the assessee filed its regular return of income under Section 139(1) of the Income Tax Act, 1961 (in short the Act) on 27.08.2015 declaring total income of Rs. 3,64,820/-. Subsequently a search and seizure action under Section 132 of the Act was carried out on the members of Kiran Fine Jewellers Group on 02.08.2017 of which assessee is one of the members. Pursuant thereto, notice under section 153A was issued on 11.01.2019. In response, the assessee filed a return on 12.02.2019, declaring the same income as in the original return.
3. Thereafter, statutory notices under the Act were issued and assessment proceeding were commenced. During the assessment proceedings, the Assessing Officer, on the basis of information available through the Annual Information Return (AIR) and CIB transactions, noticed cash deposits aggregating to Rs.36,75,715 in the assessee’s account with Malviya Urban Cooperative Bank. The assessee explained that the deposits were sourced partly from cash withdrawals of Rs.10,00,000 on 06.12.2013 and Rs.20,00,000 on 31.12.2014, which had been withdrawn for proposed purchases of plots that did not materialise, and partly from cash consideration of Rs.2,00,000 received on the sale of a plot. It was further submitted that the assessee was engaged in the business of purchasing and selling plots and that the cash withdrawn for proposed transactions was re-deposited when the transactions could not be completed.
4. The Assessing Officer did not accept the explanation. He observed that the assessee had failed to furnish particulars or documentary evidence of the proposed property transactions or explain why the purchases could not be completed. He also questioned the withdrawal and subsequent redeposit of substantial cash, particularly in view of the time gap between the transactions. According to the Assessing Officer, the cash of Rs.10,00,000 withdrawn on 06.12.2013 was deposited in February 2015, after approximately fourteen months, whereas the cash of Rs.20,00,000 withdrawn on 31.12.2014 was deposited in March 2015, after approximately three months. Holding that the source of cash deposits remained unexplained to the extent of Rs.10,00,000, the Assessing Officer treated the same as unexplained money under section 69A of the Act and subjected it to tax under section 115BBE. The assessment was completed under section 143(3) read with section 153A on 18.12.2019.
5. On further appeal before Ld. CIT(A), the assessee raised the grounds challenging validity of making addition under Section 153A without there being any incriminating material. The assessee also challenged the merit of the addition but assessee could not succeed on both counts. Aggrieved thereby, the assessee is in appeal before us, challenging the assessment on the ground that the addition was made in the absence of incriminating material found during the search and, alternatively, disputing the addition on merits and the consequential application of section 115BBE.
6. In ground no. 1, the assessee is aggrieved with making addition under Section 153A without there being any incriminating material.
7. We have heard rival submissions of the parties and perused the material available on record.
8. The issue for consideration in the ground raised is whether, in respect of the assessment year under appeal, an addition could be made under section 153A of the Act in the absence of incriminating material found during the course of search. In PCIT v. Abhisar Buildwell (P.) Ltd. [2023] 454 ITR 212 (SC), the Hon’ble Supreme Court settled the legal position that, in the case of completed or unabated assessments, no addition can be made under section 153A in the absence of incriminating material found during the search. Where incriminating material is found, additions may be made in accordance with law, having regard to such material and the statutory framework.
9. In the present case, the original return was filed on 27.08.2015. As per the material placed before us, no notice under section 143(2) was issued within the prescribed period. The assessment year under appeal had, therefore, attained finality and constituted an unabated assessment on the date of search. Consequently, in the absence of incriminating material found during the search, the Assessing Officer could not have made the impugned addition in proceedings under section 153A.
10. On examination of the assessment order, we find that the addition of Rs.10,00,000 rests on information concerning cash deposits obtained through AIR and CIB transactions and on the Assessing Officer’s rejection of the explanation furnished by the assessee. The assessment order does not identify any incriminating material found or seized during the search having a bearing on the impugned addition. The addition thus proceeds on the basis of information available to the Department and the assessment proceedings, rather than any incriminating material unearthed during the search.
11. In these circumstances, the jurisdictional condition for making an addition in respect of an unabated assessment under section 153A, as explained by the Hon’ble Supreme Court in Abhisar Buildwell (P.) Ltd. (supra), is not satisfied. The impugned addition, therefore, cannot be sustained.
12. Accordingly, we set aside the order of the learned CIT(A) on this issue and direct the Assessing Officer to delete the addition of Rs.10,00,000 made under section 69A of the Act. The consequential application of section 115BBE, being dependent upon the said addition, also does not survive. In view of our decision on the legal ground, the grounds challenging the addition on merits are rendered academic and are not adjudicated upon.
13. In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 21.10.2026
